TRADE AND SECURITY ISSUES REVIEWED AT KYRGYZ

C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 001589 SIPDIS SIPDIS E.O. 12958: DECL: 11/13/2016 TAGS: PGOV PREL PREF PHUM KDEM KG SUBJECT: TRADE AND SECURITY ISSUES REVIEWED AT KYRGYZ BORDER, BAZAAR BISHKEK 00001589 001.2 OF 003 Classified By: Ambassador Marie L. Yovanovitch, Reason 1.4 (b) and (d) ¶1. (C) SUMMARY: On October 19 and 20, SCA DAS Evan Feigenbaum visited three border posts along the Kyrgyz-Uzbek border: two closed crossings in the city of Karasuu and one in Osh, which is being reconstructed but remains open. The lack of Uzbek-Kyrgyz information-sharing across their border indicates both sides may continue to restrict the flow of people and goods. DAS Feigenbaum also visited the Karasuu bazaar, claimed to be Central Asia's largest outdoor market and now filled with Chinese consumer goods and Han Chinese merchants. With the success of Kyrgyzstan's Karasuu market, the Uzbeks apparently recognize the potential economic benefits of gaining direct access to Chinese goods, and two similar markets are being constructed in Uzbekistan: another open-air bazaar across the Uzbek border from Karasuu, and a market in Tashkent. Some worry that this will, in effect, cut out the Kyrgyz by moving goods overland directly into Uzbekistan. Such economic competition continues to be subject to the policies of the Kyrgyz and Uzbek Governments, however, as each determines how best to utilize the official border posts that vendors rely upon to move their merchandise from one country to another. END SUMMARY. DOSTUK: A WORK IN PROGRESS -------------- ¶2. (SBU) During a visit to the Dostuk border post in the southern city of Osh on October 19, SCA DAS Evan Feigenbaum, together with Ambassador Yovanovitch, witnessed first-hand the construction of new store fronts accompanying the renovation of the border post. Using U.S. funds provided to the International Organization for Migration (IOM),the reconstruction of the Dostuk border post could, according to IOM, support the flow of over fifty thousand people each day. With routes for both vehicular and pedestrian traffic, the renovated border, due to fully reopen by January, will constitute one of the largest crossings along the Kyrgyz-Uzbek border. As a result of the potential influx of people and goods coming into Kyrgyzstan from Uzbekistan, investors, reportedly from China, have initiated the construction of a large open-air bazaar adjacent to the border. ¶3. (C) IOM Chief of Mission Zlatko Zigic told DAS Feigenbaum ;that such an increase in traffic could increase trafficking in contraband merchandise, people, narcotics and weapons. To track such illegal activities, the USG has provided to the Kyrgyz border service detection equipment, including density scanners, metal and radiological detectors. While pointing out the large metal/radiological detector--one big enough to drive a truck through--on the Uzbek side of the border, Zigic commented that until IOM is able to erect a similar detector on the Kyrgyz side, it will remain impossible to tell whether illegal goods or weapons are being smuggled into Kyrgyzstan, due to Uzbekistan's refusal to share information with Kyrgyz counterparts. (Note: As part of the completed renovation, such a detector will be installed on the Kyrgyz side of the border as well. End note.) Given the lack of information-sharing and general animosity that clearly exists on both sides of the border, Zigic confided, Kyrgyz border security officials could run into difficulties as they attempt to control the increased traffic going in both directions. KARASUU: THE NEXUS OF TRADE AND REGIONAL COMPETITION -------------- -------------- ¶4. (C) In Karasuu, DAS Feigenbaum visited what is said to be Central Asia's largest open-air bazaar, before inspecting two border posts situated near the market. While speaking in Mandarin Chinese to one of the many Han Chinese vendors scattered throughout the bazaar, DAS Feigenbaum heard that despite the harassment some vendors receive from their Kyrgyz competitors, business has been booming. Eighty percent of the Chinese merchants hail from the same province, Fujian, BISHKEK 00001589 002.2 OF 003 along China,s eastern seaboard. Some have brought their families west but have left them in Xinjiang on the Chinese side of the border. As Chinese-made products continue flooding the market, Chinese vendors have made use of these family and personal contacts in China to access goods and capital and thus meet the Kyrgyz and Uzbek demand for inexpensive merchandise. Han traders are able to tap social networks and commercial ties inside China that many Kyrgyz, Uzbek, and Uighur traders lack. Some social tension has emerged between groups: the Chinese merchants offered DAS Feigenbaum various examples of their distaste for life in Central Asia. ¶5. (C) The first border post visited in Karasuu, used primarily for vehicular traffic, located almost directly across the street from the Karasuu bazaar, revealed that the Uzbeks are clearly attempting to control the flow of people and goods across the border, but also the economic benefits Kyrgyzstan has gained as a result of the influx of Chinese consumer goods brought into Kyrgyzstan. The border, separated by a man-made canal that splits what used to be the unified city of Karasuu, was closed by the GOU in 2004 and is scheduled to reopen on November 1. (IOM has verified, as of November 9, that the border post was, in fact, still closed. End note.) With no traffic going either way, the border guards on both sides were left facing one another in Korean DMZ-like fashion, sneaking pictures of visitors on their respective digital cameras. ¶6. (C) The absence of traffic made it easier to see the construction of what is supposed to be one of the largest bazaars in Uzbekistan, just across the border. Clearly a sign that Uzbekistan is hoping to take advantage of the trade, mostly in Chinese-made goods currently being sold in Kyrgyzstan, the Uzbek bazaar could present stiff competition to Karasuu if the GOU is able to establish favorable trade arrangements directly with the Chinese that reduce Kyrgyzstan to a waystation on the road from China to Uzbekistan. As the Osh Director of USAID's Trade Facilitation and Investment Project Sabir Akimbaev told DAS Feigenbaum, the GOU is hoping to abolish all barriers to trade, be it tariff or particular import restrictions, with China in order to ease the flow of Chinese goods into Uzbekistan. Conversely, customs tariffs will be raised for Kyrgyz traders. Should that occur, Chinese merchants will be able to set up shop in Uzbekistan, thereby limiting the amount of Chinese merchandise traded in Kyrgyzstan while reducing incentives for Uzbeks to cross the border for trade. If this plays out as Uzbekistan appears to want, Akimbaev said this would be detrimental to Karasuu's growth, as well as to the Kyrgyz economy as a whole. ¶7. (C) Karasuu's second border crossing is a pedestrian crossing illegally opened after the Andijon crisis by the people of Uzbekistan. Used as a pressure valve by the Uzbek authorities, approximately 30,000 people crossed the bridge everyday -- now, however, the border crossing has been closed due to the expected opening of Karasuu's vehicular border crossing on November 1. With no border posts open in Karasuu, people have resorted to crossing the border illegally at various points along the canal. With a large number of private homes situated on the edge of the canal, many Kyrgyz and Uzbek families have allowed people to cross through their territory illegally, usually for a small fee. COMMENT -------------- ¶8. (C) With regional trade and security at the forefront of Kyrgyzstan's foreign policy, border crossing issues along the Kyrgyz-Uzbek border will continue to be exploited by both sides, as both governments attempt to control and take advantage from the flow of people and goods. The influence of Chinese products and Han Chinese traders also presents an interesting harbinger of things to come, as it appears that historic trade patterns are being restored and that Kyrgyzstan and Uzbekistan may try to dominate the China trade BISHKEK 00001589 003.2 OF 003 by easing the flow of Chinese-made merchandise into their respective bazaars. Given that fears of a "Chinese takeover" do exist on both sides of the border, however, it remains to be seen just how open either Kyrgyzstan or Uzbekistan will be to what appears to be an unstoppable influx of Chinese goods and Chinese merchants. END COMMENT. ¶9. (U) DAS Feigenbaum has cleared this cable. YOVANOVITCH